Obama rejects Keystone oil pipeline

Demonstrators carry a giant mock pipeline while calling for the cancellation of the Keystone XL pipeline during a rally in Washington in this November 6, 2011 file photo. Protesters are unhappy about TransCanada Corp's plan to build the massive pipeline to transport crude from Alberta, Canada, to Texas.

By msnbc.com staff and wires

Updated at 5:45 p.m. ET

President Barack Obama on Wednesday rejected a Canadian company's plan to build a U.S.-spanning, 1,700-mile pipeline to carry oil across six U.S. states to Texas refineries, raising the stakes on a bitter election year fight with Republicans.

Though the project promises thousands of temporary jobs for the recovering U.S. economy, Obama said a February deadline set by Congress would not allow for a proper review of potential harm from the $7 billion Keystone XL project.

NBC's Andrea Mitchell reports.

"As the State Department made clear last month, the rushed and arbitrary deadline insisted on by congressional Republicans prevented a full assessment of the pipeline's impact, especially the health and safety of the American people, as well as our environment," Obama, a Democrat, said.

The plan proposed by Calgary-based TransCanada would carry oil from tar sands in western Canada to Texas.

Republicans assailed Obama's decision as a job-killer and said the fight was not over.

And the State Department said the decision was made "without prejudice," meaning TransCanada can submit a new application once a route through environmentally sensitive areas of Nebraska is established.

Russ Girling, TransCanada's president and chief executive officer, said the company plans to do exactly that. If approved, the pipeline could begin operation as soon as 2014, Girling said.

Republicans were not assuaged.

Newt Gingrich, campaigning for the Republican presidential nomination in South Carolina, called Obama's decision "stunningly stupid," adding: "What Obama has done is kill jobs, weaken American security and drive Canada into the arms of China out of just sheer stupidity."

House Speaker John Boehner criticizes the White House over its rejection of the Keystone oil pipeline project that many Republicans argue would have created thousands of jobs.

Sen. John Hoeven, a Republican, has said of the Canadian crude oil: "It's going to go to China if we don't build it here."

But Alex Pourbaix, TransCanada Corp.'s president for energy and oil pipelines, said last week the company soon will have a new route through the state of Nebraska "that everyone agrees on."

For now, though, Mitt Romney, the Republican nomination front-runner, called Obama's decision "as shocking as it is revealing," adding that it "shows a president who once again has put politics ahead of sound policy."

The Republican leader of the House, Speaker John Boehner, said Obama was breaking his promise to create jobs.

"This is not the end of this fight," said Boehner. He called the pipeline good for the U.S. economy and a major job creator.

The pipeline proposal has forced the White House to make a politically risky choice between two important Democratic constituencies. Many labor unions back the project because of the prospects of new jobs in a fragile economy. Environmental groups fear the pipeline could lead to an oil spill disaster.

Some liberal donors threatened to cut off funds to Obama's re-election campaign to protest the project, which opponents say would transport "dirty oil" that requires huge amounts of energy to extract.

Obama said his decision was not based on the pipeline's merits but on what he called an arbitrary Feb. 21 deadline set by Republicans in Congress. They set the deadline as part of a tax bill that Obama signed into law in late December.

"I'm disappointed that Republicans in Congress forced this decision, but it does not change my administration's commitment to American-made energy that creates jobs and reduces our dependence on oil," Obama said.

Under his administration, domestic oil and natural gas production is up, while imports of foreign oil are down, Obama said.

"In the months ahead, we will continue to look for new ways to partner with the oil and gas industry to increase our energy security," Obama said.

To underscore the point, Obama signaled that he would not oppose development of an oil pipeline from Oklahoma to refineries along the Gulf of Mexico. TransCanada already operates a pipeline from Canada to Oklahoma.

Refineries in Houston and along the Texas Gulf Coast can handle heavy crude such as that extracted from Canadian tar sands — the type of oil that would flow through the Keystone XL pipeline.

Canadian Prime Minister Stephen Harper said he was profoundly disappointed that Obama turned down the pipeline.

Sen. Kent Conrad, a Democrat, said he doesn't believe the Keystone XL is a dead project. He said the Obama administration did not have enough time to review the project, given the Republican-imposed timeline.

"I don't believe this is the end of the story," Conrad told The Associated Press. "My personal view is that it should be constructed. It's clear Canada is going to develop this resource, and I believe it is better for our country to have it go here rather than Asian markets."

Bill McKibben, an environmental activist who led opposition to the pipeline, praised Obama's decision to stand up to what he called a "naked political threat from Big Oil." Jack Gerard, the oil industry's top lobbyist, had said last week that Obama faced "huge political consequences" if he rejected the pipeline.

"It's not only the right thing, it's a very brave thing to do," McKibben said. "That's the Barack Obama I think people thought they were electing back in 2008."